1. Ahmed Mohammed Seth Shafer Shou-Jen Steve Wang
Benchmarking
Ahmed Mohammed
Seth Shafer
Shou-Jen Steve Wang

2. Benchmarking
Chalk and bench activity

3. Who
Robert C. Camp 1989
Bachelors degree in civil engineering from Cornell University
MBA from Cornell University's Johnson School of Management
Ph.D. in logistics and operations research from The Pennsylvania State University

4. Benchmarking
Is a process
Is secrets of success

5. Four Forms
Generic
Functional
Competitive
Internal

6. Types Process benchmarking Financial benchmarking
Benchmarking from an investor perspective
Performance benchmarking
Product benchmarking
Strategic benchmarking
Functional benchmarking
Best-in-class benchmarking
Operational benchmarking

7. Activity Connect the dots Rules Draw in a straight line.
Pen does not leave the blackboard.
All dots have to be connected
Goal:
As few lines as possible.

9. Prerequisites Will and commitment Vision and strategic objective link
Goals to becoming the best
Openness to new ideas

10. Prerequisites (cont.)
Understanding of existing processes, products, services, practices, and customer needs
Documented Processes
Process analysis
Research, communication, and team-building skills

11. Obstacles Internal Focus Objective too broad Unrealistic timetables
Poor team composition
OK-in-class
Improper emphasis
Insensitivity to partners
Limited top-management support

12. Rationale Global competition Current standing of company
A best-in-class model
Customers are better informed
Support of total quality

13. Examples
Xerox
Computer Hardware

14. Computer Hardware
Comparison of performance

15. Xerox Started in 1908 Big company by the 1960s
Rapid expansion of the middle management
Competition from Japanese companies by 1980s

16. Benchmarked Processes
Supplier management system
Inventory management
Manufacturing system
Marketing
Quality

17. Benefits of benchmarking
Fewer customer complaints
Reduction of defects
Reduction in service response time
Reduction in defective incoming parts
Reduction in inventory costs
Reduction in labor costs
Reduction in billing errors

18. Benefits of benchmarking
Increase in customer satisfaction
Increase in marketing productivity
Increase in distribution productivity
Increase in product reliability

19. Seven steps to benchmarking
Identify what to benchmark
Determine what to measure
Identify who to benchmark
Collect the data
Analyze the data and determine the gap
Set goals and develop an action plan
Monitor the process

20. Seven steps to benchmarking
Identify what to benchmark
Activities involved in step-1 are
Clarifying the benchmarking objective
Decide whom to involve
Define the process
Consider the scope
Set the boundaries
Agree on what happens in the process
Flow chart the process

21. Step-1 continue Identify what to benchmark
Two approaches of benchmarking
Strategic benchmarking
Financial function could benchmark it activities (billing process)
2) Organizational benchmarking
Considerable research is done. Like soldering process, driver motor assembly benchmarking

22. Step-1 continue
As a starting point benchmark your customer interfaces by not limiting benchmarking to products. Like contract truckers, answering phone calls, accuracy of bills.
Benchmarking Product, manufacturing process, equipment, and business processes.

23. Benchmarking: A Practical Example
ATO, INC., is a manufacturer of small to medium air conditioners.
Approximately 60%- home and office use only
The remaining 40%-trucking industry, where ATO’s unique respected position in supplying units for refrigerated trucks and trailer rigs.

24. ATO, Inc.,
ATO Inc’s production supervisor for Model 724 series (home models) manufacturing area- Seth
Seth’s group is a customer for an outside supplier of external control panel.
Responsibility of Seth’s production area
Building the chassis and housing for the units
Installing internal components and wiring
Assembling the final products

25. ATO, Inc.,
The model 724 series manufacturing group is organized into three work areas:
Lastly. Seth’s team processes the units through the warehouse for packing and shipping to final destination.
Chassis Production
Component Install
Final Assembly
Build Chassis Components
Build Housing
Install internally-supplied control wire unit
Install vendor panels
Affix product lables

26. ATO, Inc., What is cooking in ATO’s
Each of the work area is organized into work teams responsible for setting and attaining their goals and managing their work processes.
Seth handles most of the interaction between the work team to ensure coordination and planning.

27. ATO, Inc.,
Seth’s production group members are working towards continuously improving the process.
Revamping of the production line and installation of new equipment. The feel they have reached the plateau.
Steve, most experienced assembler, put it this way “Look, we’ve done all we can on this process. We’ve tried everything and our numbers are as good as they are going to get. Got it?”

28. ATO, Inc.,
Ahmed: “Steve’s feelings are understandable, you got to do something Seth…wake up.”
They have been working hard and their recent most improvement produced smaller gains.
Seth wakes up…
Let us do benchmarking study for the entire assembly process.

29. Step-1
The first step identify what to benchmark has following sub steps
Clarify the benchmarking objectives
Decide whom to involve
Define the process
Consider the scope
Set the boundaries
Agree on the process
Flow chart the process

30. Clarify The Benchmarking Objective
We have already discussed why we have decided to benchmark-setting priorities for improvement, addressing a specific problem which needs attention and not meeting goals.
Why Seth has decided to do benchmark 
They have upgraded equipment, everyone had needed skills, and taken steps to improve quality but they are still searching for way to improve. Their objective was to have best in class final assembly process. 

31. Seth is deciding whom to involve in benchmarking team
Management support to the team
Include employees who are close to the process. Include employees who have interest and knowledge about what goes on outside the boundaries of process.
“Let us also consider internal suppliers and customers of the process. Who supply products, information, or other key inputs. Customers receive our service, products or output.”

32. Benchmarking team
Seth-Production supervisor for the Model 724 series. Given decision making authority.
Steve- A senior assembler, member of the quality improvement team.
Bill- An assembler a new employee at ATO
Maria-An inspector got promoted from the shipping department and just completed training for final assembly area. She installs the labels and information plates at the end of the process (is some sense she is a final customer for the process)
Simon-A former assembler who now works in component installation area, but occasionally done assembly when team requires backup (brings internal supplier perspective)

33. Sub steps of step-1 Define the process
One need to clearly define process. A process is a series of interrelated task that are organized to produce an output.
Consider the scope
Not to be too broad or too narrow.

34. ATO, Inc.’s final assembly benchmarking team
The decide to benchmark control panel installation because they had recently experienced troubled with connections coming loose.
Steve-”That’s a good place to focus, and it is broad enough to achieve something and narrow enough that we can wrap our arms around it”

35. ATO, Inc.’s final assembly benchmarking team
Simon-” Sure. Let us define the starting and ending point of the process so that we all know exactly what we are working on?”….
Set the boundaries
After a few minutes of discussion the team reached an agreement.
Starting point-receive the panel from the inventory clerk
Ending boundary-place the unit back to the conveyor belt.

36. ATO, Inc.’s final assembly benchmarking team
Agree on the process
Receive the panel from the inventory clerk
Unpack the panel as needed and visually check for completeness (no broken wires etc)
Place the control panel on unit and attach fasteners
Solder the connections
Test the circuitry and secure the cover
Place the unit back on the conveyor belt

37. Step-2 of seven step model
Determine what to measure has three major sub steps to consider
Examine the flow chart
Establish the process measures
Verify that measures match objectives

38. Flow chart
Review the flow chart. Some of the measurable items we are looking for might be
Overall time to complete the process
Completion time for each individual task
Time spent at each decision point
Number of loops or repeats
Variation of task time
Number of defects showing up
Costs
Scrap

39. Place panels in position Yes Unpack panels Receive panels
Start No
Verify panels OK
Place panels in position
Yes
Unpack panels
Receive panels
1 min.
1 min.
1.5 min.
2 min. No
Test circuitry
Solder connections
Attach fasteners
Yes
Position of mounting holes OK
10 min.
15-18 min.
9-13 min.
.5 min.
Circuits OK No
Yes
Secure Cover
Place unit on belt
End
4 min.
.5 min.
5 min.
Total time = min.

40. Step-2
Bill-” Since we know where our inputs and outputs are coming from, shouldn’t we consider measuring that are important to our internal suppliers and customers too?”..
2)Establish process measures
Consider measures outside the process
Measures of your external customers should influence the choice of process measures to benchmark (even though it is distant from customers contact)

41. Step-2
Measures of your internal suppliers and customers requirement. Since their performance is linked to yours, your measures should be linked as well
ATO, Inc internal customers are the shipping and warehouse department and their internal suppliers are component installation area and inventory department.

42. Step-2
Link supplier and customer measures with in-process measures.(fig)
Seth’s benchmarking team took the interview of both internal suppliers and customers.
As the team looked back they concluded based on the flow chart, internal suppliers and customer measures.
They concluded that the total time for the process varied due to several reasons.

43. Step-2 Seth’s decided to benchmark three measures Time for completion.
Downtime
Number of reworks
Verify that measures match objectives
For example, if a group’s goal was to increase productivity, they would need to look at measures such as time quantities of output, cost per unit

44. Step-3 Identify who to benchmark
Conduct general research
Choose the level to benchmark
Internal
Competitive and noncompetitive
World class
Seth’s team considered their ATO’s plant in northwest region and best in class Bestco, Inc.

45. Step-4 :collect the data
It’s time to gather information on the performance level of your benchmarking target and how they mange their processes.
Three main sources
Internal
Public information
Other companies: this is the most exciting part, we actually go out and discover new ideas and make careful observation.

46. Step-4 The techniques for gathering benchmarking information.
Using a questionnaire
Conducting a benchmarking site visit
Using a questionnaire: things to remember
Include a detail information of the process
List task included
List problem or concerns relating to it

47. Step-4
Including information and questions on the how the process is measures and performance criteria
Quality
Time
Cost, etc.

48. Step-4 Focus on process improvement the benchmark target has developed
What kind
How
Cost versus the best result
Technical difficulties
Determine the area of support for the process like training, methods, technology,
Staff background and documentation methods

49. Step-4 Conducting a benchmarking visit: Prepare for the visit
Organizational climate
How many and who will be going
How will the visit be conducted
Who will take notes and how
Document the visit

50. Process Your Process Organization #1
Product or services that is produced (output)
Key characteristics of output
Measures that will be compared
Measurement data (findings, comparisons)
Gaps between our process and another organizations’
(positive or negative)

51. Step-4
Seth’s team have the results

52. Measurement data – (findings, comparison)
Key measures
ATO, Inc. Model 724
ATO, Inc. Northwest Region Plant
Bestco, Inc.
Total time
45 – 52 min.
min.
22.5 min.
Downtime (per unit)
3 – 5 min.
1 – 2 min.
Percentage of reworks 4%
3.5%
0.25%

53. Step-5: Analyze data and determining gap

54. Average Process Time

55. Average Downtime Per Unit

56. Average Percent of Reworks

57. Step-5
Seth’s team was surprised after looking at the gap between their processes and that of Bestco, Inc.
Steve added “ You know, if someone have told me a month ago that you could get these kind of numbers, I wouldn’t have believed it,”
Seth” we thought we have improved our process as much as we could.”

58. Step-6: Set goals and develop and action plan
Set performance goal
Goal should be achievable in increment( 3*5=15 hrs)
Goals should realistic (time, res, abilities, skills and budget)
Goal should be measurable ( reducing three hours)
Goal should be finite (starting and ending pt)
Goal should be supported

59. Step-6 Seth’s team benchmarking goals
Reduce total task time to 30 minutes (5m per Q)
Reduce downtime from three to one minute per unit (end goals to be reached in 9 m)
Reduce reworks from 4 percent to 2.5 percent (6m)

60. Step-6 Developing action plan
Step One-determine tasks, timelines, and responsibilities
Points to consider-who will be affected and responsible for implementation?
What resources will the person responsible for task need. How the information will be shared
Step Two-develop contingency plan

61. Action Plan Action Step Responsible Person or Group Begin – End Date
Estimated Duration
Estimated Cost
1. Feasibility study to install new technology in final processing area
Benchmark Team
10/1 – 10/30
One Month
$5,000

62. Action Plan Action Step Responsible Person or Group Begin – End Date
Estimated Duration
Estimated Cost
2. Vendor selection for new technology
Final assembly
10/1 – 10/7
35 hours
$600
3. Design project plan for installation
Senior management
10/7 – 10/14
28 hours
$1,200

63. Action Plan Action Step Responsible Person or Group Begin – End Date
Estimated Duration
Estimated Cost
4. Purchase and install new equipment
Vendors plus three staff members
11/1 – 3/2
1,280 hours
$44,800
5. Test
Vendor plus 2 staff members
1/30 – 2/15
40 hours
#1,200

64. Step-7: Monitor the process
Track the change
Make benchmarking a habit
Benchmarking progress report
Regular progress meeting
Monitor customers (internal and external)
Monitor suppliers (internal and customer)

65. Step 1 Identify what to benchmark
Clarify the benchmarking objective
Decide whom to involve
Define the process
Consider the scope
Agree on the process
Flow chart the process

66. Step 2 Determine what to measure
Examine the flow chart
Establish process measures
Verify that measures match objectives

67. Step 3 Identify who to benchmark
Conduct general research
Choose level to benchmark

68. Step 4 Collect the data Use a questionnaire
Conduct a benchmarking site visit

69. Step 5 Analyze data and determine the gap
Quantitative data
Qualitative data

70. Step 6 Set goals and develop an action plan
Set performance goals
Develop an action plan

71. Step 7 Monitor the process
Track the changes
Make benchmarking habit

72. Discussion

73. Conclusion VS continuous improvement VS reengineering
7 Step benchmarking model

74. References
Chang, R. & Kelly, P. (1994). Improving Through Benchmarking. Richard Chang Association, Inc. Irvine, CA. ISBN:

75. Thank you for your time.